4.6. Short Call Butterfly

Proficiency

Direction

Volatility

Asset Legs

Max Risk

Max Reward

Strategy Type

+

+

Intermediate

Neutral

High

• Short Call

Capped

Capped

Capital Gain

• Two Long Calls

• Short Call

4.6.1. Description

The Short Call Butterfly is another volatility strategy and is the opposite of a Long Call Butterfly, which is a rangebound strategy. The reason that short butterflies aren't particularly popular is because even though they produce a net credit, they offer very small returns compared to straddles and strangles with only slightly less risk.